Understanding the Challenges of a VUCA Environment

VUCA was coined by the U.S. Army in the 1990s to describe the post-Cold War world: volatile, uncertain, complex and ambiguous.

“Disruption is as great as we have ever seen it,” says Joe DePinto, CEO of 7-Eleven. “We are seeing all aspects of VUCA.”

VUCA? Yes, VUCA. The acronym was coined by the U.S. Army in the 1990s to describe the post-Cold War world: volatile, uncertain, complex and ambiguous. The idea of VUCA has since been embraced by leaders in all sectors of society to describe the nature of the world in which they operate: the accelerating rate of change (volatility), the lack of predictability (uncertainty), the interconnectedness, of cause-and-effect forces (complexity) and the strong potential for misreads (ambiguity).

“There is no question that we are in a VUCA environment,” says Bob Leduc, president of Pratt & Whitney, the $15.1 billion aircraft systems manufacturer. “When you think about our business, we’ve got a very complicated landscape. We have technology moving; we have commercial and military customers redefining what their business models are and what they value now versus what they previously did. So basically, the whole landscape is moving on us in many different directions. Because of that, we actually need to have an organization that can move quickly.”

So how do CEOs and their companies understand the challenges of a VUCA environment? We talked with DePinto, Leduc and four other top corporate leaders from a variety of industries to find out, including Mike Fucci, chairman of Deloitte; Margaret Keane, CEO of Synchrony Financial; Tony Guzzi, CEO of the construction services corporation EMCOR; and Bob Weidner, CEO of Metals Service Center Institute (MSCI), the trade group representing the industrial metals supply chain in North America.

Build a Responsive Culture

Top of the to-do list for everyone we talked to is creating, shaping and transforming their organization’s culture to be more responsive.

The executives spoke about the values of integrity, trust, empowerment, employee and leader development and learning as being essential in the new normal of VUCA.

“In the end, the biggest thing you can try to shape is the culture in the organization,” says Guzzi. The executive’s role, says DePinto, is “getting the right culture, setting the right tone, demonstrating… that is the way we want to do things, but it’s picking the right folks and then allowing them the leeway… giving their folks room to run and room to grow.”

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Once corporate values are articulated and shared, the executives reinforce them through personal example and by ensuring they cascade throughout the organization. They also understand they need others to shape and reinforce the corporate culture. They use the values to guide hiring decisions and personnel development processes, and they ensure that all the organizational systems are aligned and synchronized to embody the culture.

Among other values, Leduc stressed empowerment, integrity and employee development at all levels. He also recognized that he could not shape the culture alone. “I can certainly set the tone, but then I need these 225 executives to do that exact same thing. They need accurate senses to find it, they need to model it and they need to embrace and nourish it.”

These CEOs did more than formally communicate the company’s values; they were present throughout the organization to encourage and reinforce the values. “You’ve got to be visible, particularly in a franchise business—franchisees have to know that the leadership is available,” says DePinto. “So we are very open, available and accessible.”

At Pratt & Whitney, Leduc reinforced culture and values alignment through periodic conversations at all levels. “We have this thing called performance connections,” he says. “It is different than a performance evaluation. We sit with our direct [reports] three times a year. It’s really, ‘How’s it going? What can I do to help you? Is there anything I can do to make this easier—more money, more capital, whatever it is?’ And also, my question is, ‘What are you doing to change the culture? What have you done in the last four months, since I saw you last, to change the culture?’”

Create a Learning Organization

Second, the executives are transforming their companies into learning organizations. They are encouraging experimentation with new products, services and procedures. From corporate R&D “skunk works” to small-scale pilot projects to cross-functional project teams, they are investing in experiments with new ways of doing business within their markets.

They are also creating conditions where the organization can learn from experience, making “work” the “curriculum” for improvement and innovation. Many employed after-action reviews on a routine basis, where work groups take stock of their collective performance following major events or tasks, looking at what worked, what went wrong and what needs to be improved. For example, to facilitate organizational learning, Fucci at Deloitte engages the firm’s partners in conversations about specific events. Several innovations resulted from this process.

Pratt & Whitney’s Leduc recently brought together his executive leadership team to review actions taken over the past nine months to implement culture change and align systems. He also recognizes that there will be times when things don’t go as planned, and it is important to learn from mistakes as well as successes. “I will tell you that in virtually every meeting we have now, we have a conversation around ‘what went well, what could we have done better and what have we learned from this?’” says Leduc.

Tony Guzzi at EMCOR says the CEO’s reaction to failure can build trust and reinforce the company’s values. “When you’re at the top of an organization, bad news needs to travel relatively fast, right?” says Guzzi. “And really bad news has to travel exceptionally fast. The only way that really bad news will travel exceptionally fast is if you build a culture of trust—that when someone gives you that bad news and they’ve been a good performer and made good decisions—even if they haven’t—that you’re going to react appropriately. If they think you will immediately fly off the handle or that everybody around it goes into cover-up mode, then that’s not going to be a good outcome.”

“When you’re at the top of an organization, bad news needs to travel relatively fast, right? And really bad news has to travel exceptionally fast.”

Invest in Your People

Finally, the executives are investing heavily in employee learning and leader development. They understand that organizational agility requires employees who have the knowledge, skills and personal attributes to operate within the corporate culture they are trying to establish. Employee training programs are planned and delivered to create a workforce that embodies the culture. Leader development efforts leverage stretch assignments and work experiences, which are supplemented with supportive coaching and mentoring to grow and expand the leadership bench of potential executives.

“You cannot ignore the development of the employees, because they are the foundation of how things operate every day,” says Synchrony Financial’s Margaret Keane. “We have to make sure we are thinking through the skill sets of our employees to make sure they will be successful in their careers and that we have the right talent.” All the companies we studied have inhouse employee training programs. Deloitte,

for example, takes pride in Deloitte University, which uses case studies in small-group settings to prepare professionals for the complexity and ambiguity inherent in their business environment and to help clients solve their challenges.

“When you walk through the doors, you see a different setting,” says Fucci. “After you check in, your mind switches to learning mode. It’s very collaborative, a lot of group settings and multimedia interactivity. Not a lot of presentations. Groups of 6 to 8 to 20 can get together and solve problems. We do a lot of case studies; we do a lot of hands-on kind of learning. It’s a very immersive experience.”

Synchrony addresses development by moving people with real talent, leadership and capabilities to different functions. MSCI’s CEO, Bob Weidner, sees his organization’s role as offering training and education for client companies. He has established a graduate program—the Strategic Metals Management program (SMM) at Washington University in St. Louis, and he sponsors conferences on emerging trends in the metals industry.

Pratt & Whitney has a comprehensive employee training program that includes leadership training for managers at all levels. In addition, stretch assignments and cross-functional rotational programs develop high-potential leaders for more senior positions. Leduc believes much of his company’s leadership development philosophy revolves around modeling and reinforcement of positive behaviors until they become ingrained in employees’ DNA.

Listen, Be Patient and Persevere

At the end of the interviews, we asked the executives to reflect on how well their efforts are working. They mentioned that employee surveys and “voice of the customer” feedback provide indications for how internal and external stakeholders perceive change efforts. They also believe it’s important to be visible and available to employees—listening to employees at all levels share their stories and experiences with change.

They employ “leadership by walking around.” The executives expect the changes to result in better performance of the business. Although they are anxious to see early results, they also understand

that many of their efforts will need time to fully blossom. While they understand the importance of patience, they are eager to celebrate early successes and anticipate making great progress.

Perhaps this is the most important take away: Excellence in a VUCA environment takes time, requires strong leadership and agile, resilient team members dedicated to being learning leaders who persevere in the face of resistance and setbacks.

Read more on VUCA and the CEO’s role in shaping an organization’s culture.

Brigadier General George Forsythe, Karen Kuhla and Daniel Rice: By Brigadier General George Forsythe, Ph.D., Karen Kuhla, Ph.D. and Daniel Rice, MBA, are with the Thayer Leader Development Group at West Point, NY.